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The Rebound Effect for Passenger Vehicles

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  • Linn, Joshua

    (Resources for the Future)

Abstract

The United States and many other countries are dramatically tightening fuel economy standards for passenger vehicles. Higher fuel economy reduces per-mile driving costs and may increase miles traveled, known as the rebound effect. The magnitude of the elasticity of miles traveled to fuel economy is an important parameter in welfare analysis of fuel economy standards, but all previous estimates impose at least one of three behavioral assumptions: (a) fuel economy is uncorrelated with other vehicle attributes; (b) fuel economy is uncorrelated with attributes of other vehicles owned by the household; and (c) the effect of gasoline prices on vehicle miles traveled is inversely proportional to the effect of fuel economy. Relaxing these assumptions yields a large effect; a one percent fuel economy increase raises driving 0.2 to 0.4 percent.

Suggested Citation

  • Linn, Joshua, 2013. "The Rebound Effect for Passenger Vehicles," RFF Working Paper Series dp-13-19-rev, Resources for the Future.
  • Handle: RePEc:rff:dpaper:dp-13-19-rev
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    References listed on IDEAS

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    More about this item

    Keywords

    fuel economy standards; passenger vehicles; vehicle miles traveled; household driving demand;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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